HM Revenue and Customs (HMRC) is warning British workers to be vigilant about their company’s operations. It comes as the government prepares to launch a consultation to enhance tax collection and crack down on tax avoidance schemes, with a particular focus on ‘umbrella companies’.

Umbrella companies, which manage payments for contractors, are often used by recruitment agencies. However, HMRC has cautioned that some umbrella companies attempt to lure workers into tax avoidance schemes, making excuses such as having “too many people on our payroll”.

HMRC has taken to social media to issue a warning, stating: “Umbrella company warning. If they say ‘we have too many people on our payroll’ it means we’re hot on their heels and they’re moving their customers to a new company. Don’t get caught out.”

Red flags that might indicate a tax avoidance scheme

To avoid falling prey to tax avoidance schemes, workers are advised to check their payslips to ensure they are paying the correct amount of tax. Payslips should be compared to contractual agreements to verify that the correct amounts of Income Tax and National Insurance contributions have been deducted through the PAYE system.

A clear indication that you’re wrapped up in a tax avoidance scheme is if your bank account brings in a higher amount of cash than the amount displayed on your payslip.

What should I do if I’m involved in a tax avoidance scheme?

If you suspect you’re embroiled in a tax avoidance scheme, it’s recommended to get in touch with HMRC quickly for advice on the appropriate actions to take. Settling any outstanding tax is ultimately your obligation, even if you unintentionally got involved in a tax avoidance scheme.

In some instances, you might be obliged to pay interest on the due tax, which could accumulate over time and lead to an unexpectedly large bill. If you’re uncertain about whether you’re paying the correct amount of tax, you can utilise this interactive risk checker for more clarity – ensure you have the following documents ready before using the checker:

• payslips
• employment contracts or agreements
• key information document
• any other documents you have relating to your employment arrangements
• bank statements
• payment advice

Additional guidance on umbrella companies and tax avoidance can be seen at GOV.UK here.